Korea

By Tim Shorrock, Foreign Policy In Focus,
Vol. 3 No. 1, February 1998

Key Points

With South Korea facing serious economic problems and North Korea
nearing political collapse, the Korean peninsula is entering a period of
turbulence and change.

The U.S., which has 37,000 troops in South Korea, bears important
responsibilities to help end the cold war in Korea.

The South Korean presidential election of Kim Dae Jung, long-time
leader of the democratic opposition, has created an important
opportunity for easing tensions in Korea.

North and South Korea-with a population of 70 million people in a
strategic corner of Northeast Asia-have received more media attention
over the past three years than at any time since the end of the Korean
War in 1953. In December 1997 the U.S. and the International Monetary
Fund crafted a $57 billion bailout to rescue South Korea from a
financial crisis that clouded the reputation of the once-vaunted
Korean economic miracle. Since 1994, when the U.S. almost went
to war over allegations that North Korea was developing nuclear
weapons, enormous attention has been focused on the northern part of
the Korean peninsula. In 1997, news emerged of massive starvation
caused by natural disasters and the collapse of North Korea's
economic system. With South Korea facing unprecedented economic
challenges and North Korea seeking ways to avoid the fate of its
former communist allies in Eastern Europe, the Korean peninsula will
remain volatile (and a major focus on U.S. foreign policy) for years
to come.

Many of Korea's problems stem from Japan's brutal colonization
between 1910 and 1945 and the peninsula's tragic division in the
aftermath of World War II. Cold war tensions on both sides of the
border exploded in 1950, when North Korea sought to unify the country
under the leadership of Kim Il Sung and overthrow the
pro-U.S. government in the South. The U.S. forces, which were sent to
intervene in what was essentially a civil war, never left. Today,
37,000 U.S. troops remain in South Korea, concentrated near the border
with the North as a tripwire to automatically ensure U.S.
involvement if another war erupts. South and North Korea remain two of
the most militarized countries on earth, with over two million
soldiers under arms.

Over the past 30 years, South Korea has risen from a major recipient
of U.S. aid to become a major exporter of automobiles, steel, and
semiconductors as well as the fifth-largest market for U.S. goods. Its
political system has also undergone a major transformation. In 1986
millions of South Koreans demanded an end to two decades of military
dictatorship, forcing the unpopular government of Chun Doo Hwan to
agree to direct presidential elections. The democratic movement took a
historic turn in December 1997, when Kim Dae Jung, the country's
leading dissident, was elected president.

With the advent of democracy, Korean workers organized what has become
one of the strongest labor movements in the world. In 1996 Korean
unions launched a general strike to successfully defeat a labor law
that made it easier for companies to fire workers. Unions now play a
key role in their country's economic restructuring.

North Korea is a Stalinist state where decisionmaking is highly
concentrated in the ruling Workers Party and the military, but has
entered a period of rapid change. In the early 1990s, North Korea
reached a state of crisis following the Soviet demise, which deprived
the country of cheap oil supplies and a key market. With his plans for
a self-reliant economy in shambles, and apparently fearing a
U.S. military strike, Kim Il Sung forced a confrontation with the
U.S. in 1993 by building a secret plutonium facility that was
quickly discovered by U.S. intelligence. War was averted when former
President Jimmy Carter initiated negotiations with Kim, who died in
1994 and was succeeded by his son, Kim Jong Il. In 1995, the North
agreed to stop the plutonium project in exchange for improved
relations with the U.S. and international assistance in building a
nuclear power system using U.S.-designed light water reactors.

In March 1998, the United States, South and North Korea, and China
began formal talks to end the Korean War. Meanwhile, the North is
trying to head off a collapse by slowly opening parts of its economy
to foreign investment and technology.

Problems With Current U.S. Policy

Key Problems

The Pentagon has too much power over U.S. policy in Korea and
frequently overestimates the North Korean threat in order to preserve
U.S. military interests in Korea.

The IMF program in South Korea is forcing Korean workers to bear the
burden of mistakes made by corporations and banks, planting the seeds
for future political unrest and instability.

U.S. policymakers and businessmen view Korea through the prism of the
cold war, and not as a sovereign, independent nation.

Despite vast changes in Seoul and Pyongyang, cold war thinking still
dominates the U.S. approach to Korea. To justify the continued
presence of 37,000 U.S. troops and the sale of billions of dollars
worth of U.S. weapons in Korea, the Pentagon has consistently
overestimated the military threat from North Korea. During a visit to
Seoul in January 1998, U.S. Defense Secretary William Cohen warned
the financially strapped Korean government not to delay purchases of
over $1 billion worth of U.S. aircraft and weapons. To do so, he said,
would send the wrong signal and enhance and escalate tension on the
Korean Peninsula.

The standoff between North and South is indeed dangerous, and the U.S.
military has an important role to play as the two sides move toward
rapprochement. But North Korea is not the only factor in U.S. policy;
U.S. troops in Korea are also part of Washington's forward
deployment in Asia and the defense of Japan. Many analysts doubt that
North Korea, which lacks an industrial base and is rapidly losing the
ability to feed and clothe its people, has the capacity to mount a
full-scale war against the combined forces of the U.S., South Korea,
and Japan.

Meanwhile, the Pentagon has single-handedly blocked the Clinton
administration from backing a global treaty against land mines signed
by over 100 nations in December 1997. U.S. generals contend that the
thousands of antipersonnel mines along the 155-mile Demilitarized Zone
are an essential component of deterrence.

The Pentagon continues to invent new reasons (and new enemies) for
maintaining U.S. troops in Korea. The latest rationale, explained by
Defense Secretary Cohen, is the economic crisis in Asia. In February
1998 Cohen told the House Banking Committee that U.S. security
interests would be threatened if the financial crisis worsened, and he
linked the 100,000 U.S. soldiers in Japan and South Korea to the
stability of the region. It's very clear that business follows
the flag, he said. There won't be investment where there
isn't stability.

The cold war also hangs like a shadow over the troubled South Korean
economy. Under terms of the December 1997 IMF bailout, South Korea is
undergoing severe shock treatment designed to curb the power of its
huge conglomerates (called chaebol) and reform a banking system where
lending decisions were often made by the government. The painful
reforms will slow Korean growth rates from around 6% in 1996 to 2% in
1998. Unemployment could reach as high as one million as corporations
faced with bankruptcy lay off workers. At the same time, South
Korea's economy, which has been highly protected since the early
1970s, will be forced to open up, leading to unprecedented levels of
foreign ownership.

In media coverage of the crisis, it has almost been forgotten that
Chun Doo Hwan, the U.S.-supported dictator who ruled South Korea from
1980 to 1986, was convicted in 1996 of accepting millions of dollars
in bribes from the chaebol. Those companies relied on their close ties
to Chun, and his successors, Roh Tae Woo and Kim Young Sam, to create
the state-led, bureaucratic, crony capitalism that has come back to
haunt South Korea today.

Another overlooked issue is the role played in the Korean export
economy by the U.S. government and the large New York banks that will
receive a huge chunk of the IMF bailout. South Korea began its export
thrust in the mid-1960s by providing shoes, clothing, and construction
workers (and later mercenaries) to U.S. forces in Vietnam. In 1965,
under strong U.S. pressure, the military ruler Park Chung Hee signed
a normalization treaty with Japan, Korea's former colonizer. As
part of the deal, Japan provided nearly $1 billion in loans and
investments that helped jump-start Korean manufacturing industries,
including its textile and steel industries. In 1972 President Nixon
recognized Japan's role in South Korea when he revised the
U.S.-Japan Security Treaty with a clause stating that Korea was
essential to Japanese security. By the late 1970s South Korea
and Japan had a relationship resembling the U.S. and Mexico today,
with Korean workers using Japanese technology and components to make
products sold on the world market.

In 1979-1980 the Korean political and economic system nearly collapsed
when Park was shot to death by the head of the powerful Korean CIA and
Chun took over in a military coup that left hundreds of people dead in
the southwestern city of Kwangju. During that time the Carter
administration literally begged U.S. banks and corporations to
continue investing in and lending to South Korea. The financial crunch
continued until 1983, when the Reagan administration pressured Japan
to cough up nearly $4 billion to ease Chun through the crisis. That
money flowed in despite the deep fractures within Korean society, the
imprisonment of hundreds of dissidents, and Chun's atrocities in
Kwangju. Moreover, loans from key New York institutions like Chase
Manhattan and Citibank were made with full knowledge of the heavily
leveraged nature of the Korean economy and the close, incestuous
relationship between government bureaucrats, Korean banks, and the
chaebol.

Although the IMF and the Clinton administration have exerted enormous
pressure on South Korea to reform its economic system and accept
higher unemployment, they have said virtually nothing about the New
York banks' responsibilities. It was only after Congress and
critics from the right and left complained that the IMF was bailing
out the U.S. banks that those institutions agreed to reschedule $24
billion worth of loans owed by South Korea and extend its interest
payments.

Toward a New Foreign Policy

Key Recommendations

The U.S. must rethink its military posture in Northeast Asia, where
100,000 troops stationed during the cold war now face an undefined
threat.

In South Korea, the U.S. and the IMF should promote solutions that
require sacrifices from corporations and banks rather than placing the
burden on workers and consumers.

The U.S. should try to defuse the crisis in North Korea through
economic assistance and less confrontational military tactics.

The new adminstration of President Kim Dae Jung provides a historic
opportunity for U.S. policy in Korea. For the first time since its
founding in 1948, South Korea has chosen a president with no political
and financial ties to the Korean business and military elite. His
record as an opposition leader has made an important difference in
South Korea's economic crisis. Because of his stature among
Korean workers, Kim, in the days before he became president, was able
to forge an agreement between labor, business, and government to allow
companies facing bankruptcy or other emergencies to lay off
workers. In return, unions won the right to engage in political
activities and run candidates for office, while teachers and
government workers will be allowed to join unions for the first time.

Kim has also used his political clout to criticize and reform the
giant chaebol, who bear the chief responsibility for bringing the
Korean economy to the point of bankruptcy. Though a final agreement
between labor and business on the IMF-mandated changes and layoffs
will be difficult (some unions have rejected the compromise), the fact
that Korean workers are represented by independent unions has made it
possible for them to share in national economic decisionmaking. That
situation is in sharp contrast to Indonesia, for example, where
authoritarian government and a lack of labor rights is fomenting
serious political unrest.

To prevent Korean workers from bearing the brunt of IMF austerity
measures, the U.S. should ensure that the U.S. banks and corporations
that profited from the Korean export system share the burden by taking
losses on loans and giving Korean companies more time to repay their
debts. At the same time, increased attention should be paid to
supporting growth in Korean domestic industry and agriculture in order
to ease pressure on the chaebol to export their way out of the
crisis. That would alleviate Washington's fears of widespread
U.S. unemployment from the widening U.S. trade deficit with Asia.

Regarding North Korea, Kim Dae Jung's election signals more
openness in Seoul toward dialogue with Pyongyang. Given that reality,
the U.S. should take steps to improve its bilateral relationship with
the North and to move toward full normalization by lifting economic
sanctions and stepping up bilateral discussions on political and
security issues. At the same time, the U.S. government should continue
its policies to ease the humanitarian tragedy in the North by
providing badly needed food and medicine. It is also critical for
Washington to push ahead with the four-way peace talks that began in
March, allowing all sides to begin discussing the framework to go
beyond the present armistice and formally end the state of war that
exists in Korea.

For the peace talks to succeed, however, U.S. military policies in
Northeast Asia must change in a fundamental way. As a first step in
creating trust and confidence, the U.S. government should renounce the
use of landmines in Korea and set an early date for their removal,
clearing the way for U.S. support of the Ottawa landmine treaty. The
U.S. and South Korean governments must also change the status of the
U.S.-Korean Combined Forces Command, under which a U.S. general
commands South Korean troops in times of war. By taking full control
of its armed forces, South Korea will alter an imbalanced military
relationship that has no counterpart elsewhere in the world.

It is also essential to begin a discussion on the presence of over
100,000 U.S. military personnel in South Korea and Japan. The end of
the cold war and the breakup of the Soviet Union have undermined the
arguments for a forward U.S. military posture in Asia.

In the final analysis, helping South Korea through its economic
crisis, formally ending the Korean War, and working toward the
eventual peaceful unification between North and South requires the
U.S. to deal with Korea as an independent nation. The arrogance of the
past, when the democratic rights of the Korean people were overlooked
in the name of U.S. security and economic interests, has created deep
mistrust on both sides of the DMZ. With South Korea on the road to
democracy and North Korea seeking a peaceful way to enter the world
community, it is time to finally bring an end to the last cold war.

Websites

Korea Web Weekly (excellent resource on all
aspects of North and South Korea)
http://www.kimsoft.com/korea.htm

Tim Shorrock is a journalist and labor activist based in Washington,
DC. He can be contacted at TRox51@aol.com.

Foreign Policy In Focus is a joint project of the Interhemipsheric
Resource Center (IRC) and the Institute for Policy Studies (IPS). In
Focus briefs document the problems of current U.S. foreign policy and
offer recommendations for alternative policy directions that would
make the United States a more responsible global partner.